Miller v. Bank of New York Mellon
2016 COA 95
| Colo. Ct. App. | 2016Background
- In 2004 the Millers obtained an adjustable-rate mortgage secured by a deed of trust; they defaulted beginning in 2007 and ultimately negotiated a loan modification in 2013 with BANA (servicer) and BNY Mellon (note holder).
- While modification negotiations and a pending C.R.C.P. 120 foreclosure were underway (2012–2013), the Millers allege the Banks engaged in "dual tracking" (pursuing foreclosure while negotiating modification).
- The Millers began making modified payments and executed a modification in May 2013; the Rule 120 foreclosure action was dismissed in September 2013.
- In October 2014 the Millers amended their complaint asserting breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, fraud, and negligence, alleging harm from dual tracking and reliance on a National Mortgage Settlement consent judgment that limited dual tracking.
- The district court dismissed the complaint: tort claims were barred by the economic loss rule for lack of an independent tort duty or special relationship; the contract claim failed because the Millers had no reasonable expectation that the loan would be modified or that the Banks would refrain from dual tracking.
- The Court of Appeals affirmed, holding homeowners who were not parties to the federal consent judgment lack standing to enforce it, no special relationship arose, and no contract-based expectation supported the implied-duty claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether tort claims (negligence, fraud, IIED) are barred by the economic loss rule | Millers: consent judgment and servicing standards created an independent duty to avoid dual tracking; alternatively a special relationship existed | Banks: no independent tort duty; Millers lack standing to enforce consent judgment; no special relationship between lender and borrower | Held: Economic loss rule bars tort claims — Millers lack standing to enforce consent judgment and no special relationship exists |
| Whether the consent judgment (National Mortgage Settlement) created a private cause of action or duty enforceable by non-parties | Millers: consent judgment imposed servicing standards (no dual tracking) that created duties third parties may enforce | Banks: third parties lack standing to enforce federal consent decrees; consent judgment does not create private cause of action | Held: Non-parties cannot enforce the federal consent judgment; it did not create an independent duty enforceable by the Millers |
| Whether a special relationship existed between lender and borrower creating an independent tort duty | Millers: negotiations and the consent judgment created a special relationship triggering tort duties | Banks: lender–borrower is ordinarily creditor–debtor; no special circumstances here to create a special relationship | Held: No special relationship; lender–borrower status alone insufficient to create independent tort duty |
| Whether the Millers stated a claim for breach of the implied covenant of good faith and fair dealing | Millers: had a reasonable expectation that loan would be modified and that Banks would stop dual tracking during modification talks | Banks: original loan/deed of trust conferred foreclosure rights; no contractual term created an expectation of modification or no dual tracking | Held: Dismissed — Millers had no contractual reasonable expectation of modification or of forbearance from foreclosure; implied duty cannot add substantive terms to the contract |
Key Cases Cited
- Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256 (Colo. 2000) (economic loss rule framework)
- A.C. Excavating v. Yacht Club II Homeowners’ Ass’n, 114 P.3d 862 (Colo. 2005) (distinguishing contract vs. tort obligations; duty is question of law)
- United Blood Servs. v. Quintana, 827 P.2d 509 (Colo. 1992) (judicial or legislative sources of tort duties)
- Pub. Serv. Co. of Colo. v. Van Wyk, 27 P.3d 377 (Colo. 2001) (motion to dismiss standard and pleading sufficiency principles)
- Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) (non-parties may not enforce a consent decree)
- Howlett v. Rose, 496 U.S. 356 (1990) (federal law preempts state courts from declining to apply federal rules regarding consent decrees)
- Amoco Oil Co. v. Ervin, 908 P.2d 493 (Colo. 1995) (scope of implied covenant of good faith and fair dealing)
- A Good Time Rental, LLC v. First Am. Title Agency, Inc., 259 P.3d 534 (Colo. App. 2011) (special relationship inquiry)